21 January 2010

Another Down Year in Housing

The Houston-area real estate market took another hit last year, as credit remained tight, unemployment rose and wary consumers kept their distance from the housing market.

Home sales declined for the third straight year, falling 7.3 percent in 2009, according to figures released Tuesday by the Houston Association of Realtors.

While sales were down 25 percent from their peak in 2006, last year's decline wasn't as steep as in 2008.

And as long as unemployment doesn't rise, the association sees better times ahead.

“2010 surely is going to have lots of challenges, but there is so much opportunity out there,” said Margie Dorrance, the association's chair, referring to low mortgage rates, a healthy stock of houses for sale and the federal housing tax credit.

But even though a modest amount of job growth is expected later this year, rising mortgage rates could dampen the recovery.

Houston economist Barton Smith expects rates to reach close to 6 percent when the Federal Reserve stops buying mortgage-backed securities — as it has been doing to help stem the housing crisis by keeping rates low.

“Rising interest rates are going to give the Houston market another dose of reality,” said Smith, a University of Houston economics professor and director of the Institute for Regional Forecasting.

Higher mortgage rates will cause prices to fall in the lower end of the market where buyers are more sensitive to price, he said.

For now, values have held steady overall.

The median price for a single-family home last year rose slightly to $153,000, according to the housing group, which tracks sales through the Multiple Listing Service across greater Houston.

At $152,550, the December single-family home median price — the figure at which half of the homes sold for more and half sold for less — rose 5.2 percent from one year earlier, representing the eighth consecutive monthly increase, according to the report, which also included monthly data.

But sales fell 2.1 percent last month compared with December 2008.

It was the first monthly decline since August, and a more accurate reflection of the housing market.

Hurricane Ike brought home buying to a standstill in the fall of 2008, so gains toward the end of last year were skewed.

There are other potential storm clouds.

Foreclosures are still high in the lower end of the housing spectrum, Smith said.

And the number of pending sales — those listings expected to close within the next 30 days — was down at the end of last month by 17.9 percent, signaling another decline in sales volume for January.

Throughout 2009, sales and home prices were down across most of the regions tracked by the realty association.

Values fell in Brazoria County and northern parts of the Houston area where demand wasn't as strong and foreclosures were more prevalent.

Even the Inner Loop saw declines as sellers took their homes off the market and slashed prices on luxury homes.

But home shoppers expecting to get bargains in close-in areas like Montrose, the Heights and Garden Oaks were disappointed, said broker Robert Searcy of Texas Real Estate & Co.

“The deals in those established markets weren't there,” he said.

Searcy said there were bargains in what he calls “emerging markets,” neighborhoods on the fringe of Loop 610 with housing stock similar to that inside the Loop.

Areas that saw price increases included parts of Fort Bend County, Montgomery County and Katy south of Interstate 10.

On another positive note, listings aren't rising.

The number of homes on the market at the end of last year declined 1.3 percent from December 2008 to 43,185.

That represents 2,267 fewer active listings of Houston apartments and other properties than one month earlier and reflects what the industry considers a healthy absorption of housing inventory from the marketplace, the association said.

Dorrance said she's seen good activity in the $150,000 to $300,000 range.

The lowest end of the market has slowed, but showings have started picking up in the higher prices, she said.

While it's a small slice of the home sales pie, sales of properties priced at $500,000 and higher were up 48 percent last month.